California Supreme Court addresses Whether Broughton/Cruz Rule Survives Concepcion

In McGill v. Citibank, N.A., 2017 WL 1279700, at *1 (Cal., 2017), the California Supreme Court addresses whether the Broughton/Cruz rule survives Concepcion.  See Kilgore v. KeyBank, Nat. Ass’n, — F.3d —-, 2012 WL 718344 (9th Cir. 2012) (“the Broughton–Cruz rule does not survive Concepcion because the rule “prohibits outright the arbitration of a particular type of claim”—claims for broad public injunctive relief”).

In previous decisions, this court has said that the statutory remedies available for a violation of the Consumers Legal Remedies Act (CLRA; Civ. Code, § 1750 et seq.), the unfair competition law (UCL; Bus. & Prof. Code, § 17200 et seq.), and the false advertising law (id., § 17500 et seq.) include public injunctive relief, i.e., injunctive relief that has the primary purpose and effect of prohibiting unlawful acts that threaten future injury to the general public. (Cruz v. PacifiCare Health Systems, Inc. (2003) 30 Cal.4th 303, 315-316 (Cruz); Broughton v. Cigna Healthplans (1999) 21 Cal.4th 1066, 1077 (Broughton).) The question we address in this case is the validity of a provision in a predispute arbitration agreement that waives the right to seek this statutory remedy in any forum. We hold that such a provision is contrary to California public policy and is thus unenforceable under California law. We further hold that the Federal Arbitration Act (FAA; 9 U.S.C. § 1 et seq.) does not preempt this rule of California law or require enforcement of the waiver provision. We therefore reverse the judgment of the Court of Appeal.

The Supreme Court discussed whether Broughton/Cruz survived Concepcion.

Given the parties’ agreement, we do not independently analyze the arbitration provision, but proceed based on the parties’ shared view that it purports to preclude McGill from seeking public injunctive relief in arbitration, in court, or in any forum. Because, as Citibank states, the parties “elected … to exclude public injunctive relief from arbitration,” the Broughton-Cruz rule — which applies only when parties have agreed to arbitrate requests for such relief — is not at issue, and we need not consider the rule’s vitality in light of the high court’s post-Cruz FAA decisions. Instead, the question before us is whether the arbitration provision is valid and enforceable insofar as it purports to waive McGill’s right to seek public injunctive relief in any forum. (emphasis in original)

That’s probably why the Supreme Court’s decision never mentions Kilgore.  The Supreme Court went on to explain that an arbitration waiver cannot, as a matter of California law, prevent a consumer from seeking a public injunction under the UCL in any forum, and the FAA does not pre-empt it because to do so would place arbitration clauses not on equal footing, but on greater footing, than other contractual clauses.

Accordingly, the waiver in a predispute arbitration agreement of the right to seek public injunctive relief under these statutes would seriously compromise the public purposes the statutes were intended to serve. Thus, insofar as the arbitration provision here purports to waive McGill’s right to request in any forum such public injunctive relief, it is invalid and unenforceable under California law.   Citibank does not argue that the waiver is valid under California law. Instead, it argues that a California rule precluding enforcement of the waiver would be preempted by the FAA. According to Citibank, the FAA requires enforcement of the arbitration provision “as written, regardless of what it says or implies about claims seeking public injunctive relief.” “[A] court,” Citibank asserts, “may not avoid the FAA by applying state-law rules of contract interpretation to limit the scope of an agreement to arbitrate.” . . .Here, we likewise conclude that the FAA does not require enforcement of a provision in a predispute arbitration agreement that, in violation of generally applicable California contract law, waives the right to seek in any forum public injunctive relief under the UCL, the CLRA, or the false advertising law. . . .Citibank argues that the antiwaiver rule at issue here interferes with the fundamental attributes of arbitration in the same way as the Discover Bank antiwaiver rule regarding class procedures.  . . For several reasons, Citibank’s argument fails. First, contrary to Citibank’s assertion, Concepcion and its high court progeny actually support the “draw [ing]” of “a distinction between class claims and public injunctions.” The latter is a substantive statutory remedy that the Legislature, through the UCL, the CLRA, and the false advertising law, has made available to those, like McGill, who meet the statutory standing requirements for filing a private action. A class action, by contrast, “is a procedural device that enforces substantive law by aggregating many individual claims into a single claim …. It does not change that substantive law.” . . .Under Italian Colors, because the waiver at issue here is a waiver of the right to pursue statutory remedies — rather than of a procedural path to vindicating the statutory claim — it is, contrary to Citibank’s assertion, distinguishable from a waiver of class procedures.